Explanation:
Value of the forward contract = [S/(1+q)T]−[K/(1+r)T][S / (1 + q)^T] - [K / (1 + r)^T][S/(1+q)T]−[K/(1+r)T]
Value = [2,580/(1.015)0.75]−[2,540.53/(1.037)0.75][2,580 / (1.015)^{0.75}] - [2,540.53 / (1.037)^{0.75}][2,580/(1.015)0.75]−[2,540.53/(1.037)0.75] Value = \`2,551.35 - \2‘,472.242`,472.242‘,472.24 Value = +$79.11$
,551.35 - \
$79.11
(Book 3, Module 36.1, LO 36.f)
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Question 52 of 100
Suppose that the stock index in the previous question moves immediately to $2,580. What is the new value of the forward contract?
$2
A
+$78.11.
$78.11
B
−$78.11.
C
+$79.11.
D
−$79.11.
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